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Understanding why high income households save more than low income households

  • Huggett, Mark
  • Ventura, Gustavo

This paper investigates why high income households in the United States save on average more than low income households in cross-section data. The three explanations considered are (1) age differences across households, (2) temporary earnings shocks, and (3) the structure of transfer payments. We use a calibrated life-cycle model to evaluate the quantitative importance of these explanations and find that age and the structure of transfers are quantitatively important in producing the cross-section pattern of United States savings rates. Temporary shocks are of secondary importance.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 45 (2000)
Issue (Month): 2 (April)
Pages: 361-397

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Handle: RePEc:eee:moneco:v:45:y:2000:i:2:p:361-397
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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